I am often asked if I bring any fundamental analysis into my trading. While I consider myself a purely technical trader, the answer is that I use fundamental analysis to provide a catalyst to my technically based ideas. The weekly chart of 3M (MMM) is a good example of this approach.
Many of you may remember the weekly chart of MMM that I posted back in March. This Type II Trade showed all the classic signs of a Wave 5 high coupled with a divergent oscillator. Based on the technicals, I prepared to short MMM via some out of the money puts. With all the technical elements in place, the next step was looking for some event to get this thing moving. The event came this morning during the conference call when MMM released their quarterly earnings. I don't play earnings by themselves as it usually becomes nothing more than a spin of the roulette wheel, however, with a clear selling strategy in mind, I used the earnings report as the catalyst to get 3M moving my direction.
The answer to this is "yes", I do use fundamentals, but only to serve as a backstop to what I see as a technician. BTW, MMM is down nearly 5% this morning and has bumped the options 15% in the green from where they were trading yesterday afternoon.
Trade Smart...
~Duane Gott
Thank goodness you had trim sectioning off a small area!I prepared to short MMM via some out of the money puts.
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